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The public has a right to know how companies that pay no taxes pull it off

larrysummers.com

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Re: The public has a right to know how companies that pay no taxes pull it off

#71

Post by martin8412 »

ALittleLight wrote: post #26

I read about tax avoidance schemes like corporate inversions or sending all your patents to a company in some tax free haven and licensing your patents from your company for all your profits, and so on, and it makes me really mad. Companies making many billions of dollars paying no taxes. My intuition is that if I personally came up with a cute "gotcha" like this where I wound up paying zero in taxes because of some…

Well, you can blame the US governments for it being needed in the first place. If you're an American company operating in another country, you get to pay taxes twice on the same money. In the country where you sold the product, and in the US due to their worldwide taxation.

Re: The public has a right to know how companies that pay no taxes pull it off

#72

Post by gnicholas »

jusssi wrote: post #61
ALittleLight wrote: post #26

I read about tax avoidance schemes like corporate inversions or sending all your patents to a company in some tax free haven and licensing your patents from your company for all your profits, and so on, and it makes me really mad. Companies making many billions of dollars paying no taxes. My intuition is that if I personally came up with a cute "gotcha" like this where I wound up paying zero in taxes because of some…

An alternative to attempting to tax companies, is to tax people. There is no company that would just exist to forever eat money away from the public. Eventually they intend to pay the profits to a real person (either in money, or other benefits). Taxing that dividend or salary transaction might be simple enough to just work. And you have a real person to put to jail when the taxes were avoided.

This could work, but it would have to be reconciled with the existing basis step-up at death, which is a key part of our intergenerational personal tax system. If you only taxed people when there is a dividend or salary payment, a savvy CEO of a private company could follow the tax advice of "borrow, buy, die". Instead of taking a huge salary, the CEO would borrow money to pay for everything, using the shares of the company as collateral. Then when the CEO dies, the loans are repaid out of the estate. And the basis in the remaining shares is stepped up when passed to heirs.

So while you can get rid of corporate taxation, the tax treatment of natural persons at death means that folks could greatly reduce the amount of income realized during their lifetime.

Re: The public has a right to know how companies that pay no taxes pull it off

#73

Post by rootsudo »

It's not really a secret, the laws are public, the methods exactly aren't hidden as they must abide that and people in the profession understand liability mitigation.

The challenge here is education the public what assets, tax liability and general liability are for a corporation and what a corporation actually is (basically, almost, kinda a person.)

So it isn't shenanigans, it's the general public inability to learn a specific niche field and people whoa are knowledgeable, exploiting a legal loophole, on purpose whether or not the spirit/letter of the law was for that.

Re: The public has a right to know how companies that pay no taxes pull it off

#74

Post by hugh-avherald »

closeparen wrote: post #47
ALittleLight wrote: post #26

I read about tax avoidance schemes like corporate inversions or sending all your patents to a company in some tax free haven and licensing your patents from your company for all your profits, and so on, and it makes me really mad. Companies making many billions of dollars paying no taxes. My intuition is that if I personally came up with a cute "gotcha" like this where I wound up paying zero in taxes because of some…

If it's a real loophole, the government is out of luck; best it can do is remove it next year. When the money flowing through a corporation actually makes someone rich, it becomes his personal income. It's not clear that corporations paying their own taxes is even a good idea vs. collecting the same revenue through higher marginal tax rates on the beneficial owners.

Tax loopholes can generally be closed retrospectively.

Re: The public has a right to know how companies that pay no taxes pull it off

#75

Post by chii »

refurb wrote: post #66
chii wrote: post #52

Earlier quoted context omitted.

> employees income taxes? that's the employee's contribution, not the company's.

Right, but if the company didn't create the job, the income tax collected would be zero. I'm not saying the income tax collected is purely coming from the company, but take Amazon for example - their economic activity creates jobs which pay salaries that are taxed.

> their economic activity creates jobs

yes, but the employee would've gotten another job else where, so it's _not_ the company that's creating the taxation benefit! They therefore, should not be given the benefit of attributing that taxation (for PR purposes)!

The company did make some investment which led to the job - but they did said investment for their own benefit, not to create more jobs for which taxation can be levied.

Re: The public has a right to know how companies that pay no taxes pull it off

#77

Post by beefield »

jusssi wrote: post #61
ALittleLight wrote: post #26

I read about tax avoidance schemes like corporate inversions or sending all your patents to a company in some tax free haven and licensing your patents from your company for all your profits, and so on, and it makes me really mad. Companies making many billions of dollars paying no taxes. My intuition is that if I personally came up with a cute "gotcha" like this where I wound up paying zero in taxes because of some…

An alternative to attempting to tax companies, is to tax people. There is no company that would just exist to forever eat money away from the public. Eventually they intend to pay the profits to a real person (either in money, or other benefits). Taxing that dividend or salary transaction might be simple enough to just work. And you have a real person to put to jail when the taxes were avoided.

Forever is a long time. In practice there are wealthy people willing to pass vast majority of their wealth through generations.

Personally I don't think it is fair or likely healthy in the long term for the society to let vast majority of the income/wealth of wealthy and thus powerful people to go untaxed - even[1] if that income/wealth is not consumed.

[1] Actually it should be "especially if it is not consumed". In the old days there was a shortage of capital for investments indicated by relatively high interest rates. Nowadays there is shortage of consumption. But that to my understanding is a bit of a heterodox view, so I am just leaving it there.

Re: The public has a right to know how companies that pay no taxes pull it off

#79

Post by gnicholas »

wiz21c wrote: post #64
gnicholas wrote: post #32

Earlier quoted context omitted.

This is a case of economies of scale. A fairly wealthy person could save maybe $50,000 per year with the advice of the smartest tax lawyers and accountants in the world. But it would cost them $500,000 per year to pay for the structure to be created/updated. When I worked as a tax lawyer, we created structures and defended cases that saved our clients hundreds of millions of dollars. At this scale, paying for our ser…

Maybe it's a little too much to ask, but are why are you "not saying any of this is right or good". Part of my brain wishes that law would actually mean justice but somehow, if I trust only what I know, I cleary cannot judge, as you do, if finance engineering is good or bad. I'd like to know what prevents you to choose if it's good or right (as person who have worked inside the business) thx

I do have opinions about various tax provisions that I know well. But the topics I mentioned in my prior comment were not about a specific tax provision, or even tax policy generally. I was just stating the facts of life. It will always be the case that big companies will find it efficient to engage in certain revenue-producing activities that smaller companies/individuals will not.

Just as I don't have feelings about laws of physics, I don't have any feelings about economies of scale.

Lobbying is a bit different. Like most folks, the idea of 'lobbying' strikes me as wasteful/corrupt. But if you try to come up with a definition about what 'lobbying' is, and how you might try to restrict it, you realize that it is very difficult to do so without being underinclusive or overinclusive (or both!). So while I find the idea distasteful, I don't have any answers on how to 'fix' it.

Re: The public has a right to know how companies that pay no taxes pull it off

#80

Post by TheOtherHobbes »

wiz21c wrote: post #64
gnicholas wrote: post #32

Earlier quoted context omitted.

This is a case of economies of scale. A fairly wealthy person could save maybe $50,000 per year with the advice of the smartest tax lawyers and accountants in the world. But it would cost them $500,000 per year to pay for the structure to be created/updated. When I worked as a tax lawyer, we created structures and defended cases that saved our clients hundreds of millions of dollars. At this scale, paying for our ser…

Maybe it's a little too much to ask, but are why are you "not saying any of this is right or good". Part of my brain wishes that law would actually mean justice but somehow, if I trust only what I know, I cleary cannot judge, as you do, if finance engineering is good or bad. I'd like to know what prevents you to choose if it's good or right (as person who have worked inside the business) thx

Law is the UI for political power, and not inherently for justice.

If you want justice, you have to apply political leverage to steer power in its direction.

Law is also the UI for political self-interest. Unfortunately the same leverage principle applies. Which is why it's almost impossible to get real justice - including tax justice - in a plutocracy. The scales are tilted too heavily in the opposite direction.

The answer is to balance plutocracy with effective political organisation, but that's an incredibly hard problem to solve at all, never mind peacefully.

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